PERSON OF THE WEEK: As we’ve seen time and time again, mortgage rates can have a huge impact on home buyer sentiment. In general, when rates go up, home buyer confidence goes down.
This spring, the housing market is enjoying a significant drop in rates that came in February and March. The lower rates, in turn, are translating into higher consumer confidence and stronger home sales.
Also boosting consumer confidence is the fact that unemployment is low, wages are rising and home price appreciation is slowing.
So how are mortgage lenders going to capitalize on the opportunities that await them this spring? Can they compete on just rates alone – or will technology adoption and the “customer experience” become an even more important factor?
To learn more about these and other important trends that will effect lenders in 2019, MortgageOrb recently interviewed Mason Whitehead, a home loan specialist for Churchill Mortgage based in Texas.
Q: What direction do you see mortgage rates going, and how will it impact borrower confidence?
Whitehead: Whereas last year many thought interest rates would creep steadily higher, the inverse has actually held true. Rates have dropped – and as of right now they look to be holding steady. This is coupled with the Federal Reserve’s indication that they intend to not raise rates again this year. While this could quickly change, it’s given the market some breathing room as borrowers have additional peace of mind while shopping for a home.
All the same, what’s important for lenders moving forward is not their interest rate, but the additional value they bring to the table with each and every deal. Most all lenders are offering a competitive interest rate, at this point. What will really help them stand apart from the rest are the programs and tools they offer borrowers to create a positive, hassle-free home buying experience.
Q: What are your thoughts on whether this is a buyers’ or sellers’ market?
Whitehead: There has been a significant shift in the market where, right now, there is still a fair amount of competition at lower price points, but once buyers cross the $500,000 threshold, they tend to have more leverage. We are seeing those buyers get better deals and have more room to negotiate throughout the closing process.
In Texas, inventory is still competitive and we are experiencing a tight market for buyers looking to purchase below the $300,000 price point. So, sellers tend to have more sway.
Buyers are responding by looking outside of city centers and into the surrounding metro area for more affordable homes. In that $600,000 and up market, however, sellers are starting to see a marked slow-down in the home buying process, as buyers are tending to shop around and look for the best deal.
Q: How do you see technology influencing the mortgage industry, particularly when it comes to digital services for borrowers?
Whitehead: “Technology at the convergence of relationships and convenience,” is a phrase that has been circulating within the financial services industry, and it has been particularly impactful on the mortgage market. Online lenders like to promote the speed of their transactions, but the bottom line is traditional mortgage lenders have access to much of the same technology, in addition to the face-to-face interactions and experience necessary to build long-term relationships that drive referrals and repeat business.
It is likely the industry will start to see two distinct types of borrowers: those who want the digital experience of an online mortgage and those who want the traditional relationship-based approach. To truly succeed, lenders will need to be fluent in offering both depending on the preferences of each individual borrower.
Q: What types of programs or technology can lenders use to create an excellent borrower experience and set themselves apart from the competition?
Whitehead: In the near future, it will not be enough for lenders to solely offer a competitive interest rate and expect that to drive business. Lenders will need to bring real, tangible value to the table when engaging with borrowers.
This means providing them with tools and assets that not only educate and guide them through the home buying process, but that make the process itself easier as well. For example, with the right technology in place, lenders can now provide borrowers with access to real-time MLS listings, long-term analyses of various loan options tailored to their individual financial situation, and even digital journals to help them better keep track of everything in progress and share that progress with their friends, family and realtors.
Lenders can also offer borrowers the option of pre-underwriting their loan, in lieu of the traditional pre-approval, which gives the borrower an additional sense of confidence when shopping for their home.
Q: What is the importance of non-QM programs for borrowers?
Whitehead: Non-QM programs allow non-traditional buyers, such as self-employed or gig economy workers, to qualify for a loan that they might not otherwise be able to obtain. Even though these loans have a higher interest rate, it’s likely we’ll see an increase in non-QM products as more and more borrowers fail to fit within the traditional credit box, but are still good candidates for a mortgage loan.
Keep in mind, however; there is a significant difference between those borrowers who have no credit score and those who have a bad score or poor credit history. Many of those borrowers looking at non-QM products simply lack enough taxable income to qualify for a traditional mortgage. Programs like this make sense for people in these non-traditional situations because it is the only way they can qualify for a loan right now. Oftentimes, after paying down the loan for a period of time, they will be in a position to refinance to get a lower rate moving forward.